The first thing about Guitar Hero songs is that they need to be fun to play. Second comes songs that people would be familiar with (or at least bands people are familiar with), and since this is a 90s setlist, there has to be songs that define the 90s decade.

http://en.wikipedia.org/wiki/User:Alpheta

There's mine. As you can see I still need one more song for the 7th tier. Some bands I wanted included Tool, Faith No More, Nine Inch Nails, Monster Magnet, Sonic Youth, Bush, Foo Fighters, and many alternative artists, however I could not find any suitable songs that wouldn't interfere with the setliest I already made.

Now for your setlist criticism (cause you asked for it).

Been Caught Stealing is a very difficult sounding song, which is why I moved it to the 7th tier.

I chose Basket Case by Green Day because it was more speedy and frantic, and has a similarity to GH2's Monkey Wrench (sped up song consisting of chord after chord after chord). I chose Cherub Rock simply because Bullet sounds too boring, and Beautiful Disaster as opposed to All Mixed Up due to a more fun sounding track. Santeria by Sublime is more popular than Date Rape (and the word Rape would probably not be allowed in the game). I'm thinking of getting a different Nirvana song (GH2 stole the best Nirvana guitar song), but Come As You Are is simply the same riff over and over again, with a guitar solo copying the vocal meolody. Vasoline by Stone Temple Pilots is a much more guitar heavy song, as is Even Flow by Pearl Jam, Jerry Was a Racecar Driver by Primus, and Paranoid Android by Radiohead. I really don't get why people keep saying Epic by Faith No More is a 90s song, it's from 1988. Machinehead by Bush doesn't sound fun aside from that main riff. Rusty Cage consists of that (really cool) riff that plays throughout the song, and then goes into the break which leads into the breakdown, whereas Bleed Together is much more fun-sounding for lack of a better term. Amazingly we both have Prisoner of Society on our lists, and in the same tier as well. Jump by Van Halen..... what? I veered from using a Metallica song for a few reasons, including the fact that there had never been a Metallica song in any game until GH3, despite being eligible to be in all 3 of the first GH games (Don't forget Rocks the 80s). I'm not familiar with the first two songs in the 7th tier you've chosen, however I opted for Bombtrack by RATM since it's short and simple unlike Wake Up which is very layered and unconventional. And Guns N Roses shouldn't be considered for a 90s rock game.

As you can see my list may not be perfect, especially since the songs of the 8th tier are not alternatvie songs, and with 3 of them being from 1990. I'm opting for a different song by Nirvana, Alice in Chains, and Pantera, but for now those will have to do.